Li Yidong and Another v. Chen Ping and Others
Read the full judgment text of HCA 2495/2024 on BabelCite. This High Court CFI judgment was delivered on 8 May 2026.
1. This is my decision in respect of the following three Summonses:
Cites 12 cases
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HCA 2495/2024 [2026] HKCFI 2563 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 2495 OF 2024 ______________ BETWEEN
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______________ DECISION ______________ Introduction and Background 1.This is my decision in respect of the following three Summonses:
2.The background and a summary of Ps’ claim were set out at paragraphs 2 to 5 of my Decision dated 30 September 2025 (see [2025] HKCFI 5963) and will not be repeated herein. 3.The following procedural history are relevant for present purposes:
4.No DCC has been filed by D1,2&5 (although a draft DCC has been exhibited in the affirmations filed in respect of the Discharge Summons and Relief Summons) and this is the basis for Ps’ application for default judgment. 5.In respect of the Discharge Summons, the following affirmations were filed:
6.In respect of the Default Judgment Summons, the following affirmations were filed:
7.In respect of the Relief Summons, the following affirmations were filed:
8.At the hearing of the three Summonses, Mr Wong, counsel, appeared for Ps and Mr Phang and Mr Tse, counsel, appeared for D1,2&5. Discussion 9.Logically, the Relief Summons and the Default Judgment Summons should be considered together. If D1,2&5 succeed in seeking relief against the sanction imposed by the Unless Order, it follows that default judgment cannot be entered against D1,2&5. On the other hand, if D1,2&5 fails to obtain relief against sanction, in default of any defence, the court will scrutinize whether the matters as pleaded in the SOC (which are impliedly admitted) entitle Ps to the judgment sought. 10.The Discharge Summons can be considered separately. Re: Relief Summons and Default Judgment Summons 11.It is undisputed that by the deadline stipulated in the Unless Order, D1,2&5 did not file any DCC. However, it was submitted by Mr Phang that by taking out the case management stay application in paragraph 2 of the Discharge Summons, for all intents and purposes, there was compliance with the Unless Order. Essentially, it was contended that an application for case management stay is equivalent to an application for a stay under O. 12, r. 8 of RHC. Mr Phang also relied upon that the fact that LP has said on oath that reference to taking out an application under O. 12, r. 8 of RHC was intended to refer to the case management stay as proposed in their letters dated 16 May 2025 to AP. However, that latter argument can be disposed of quickly. What was subjectively intended is clearly neither here nor there when the fact of the matter is that in their own Summons they expressly sought for an extension of time to file and serve their DCC or take out an application under O. 12, r. 8 of RHC. There was never any application to amend the Discharge Summons or vary the Unless Order. 12.Neither do I accept the submissions that D1,2&5 could have obtained a case management stay under O. 12, r. 8 of RHC or that the breach of the Unless Order was only technical. 13.Firstly, it is clear that the jurisdictional basis of a case management stay (which is under the court’s inherent jurisdiction, O. 1B, r. 1(2) of RHC and s. 16(3) of the High Court Ordinance, Cap. 4) is totally different to a stay under O. 12, r. 8(2) of RHC. 14.Secondly, it is also clear that the primary purpose of each is very different. The purpose of a case management stay is for the control of parallel proceedings. Whereas O. 12, r. 8 is concerned with whether the court has jurisdiction over the defendants. See the explanation by K Yeung J in China Shanshui Cement Group Limited & Ors v Tianrui (International) Holding Company Limited & Ors [2020] HKCFI 3043 at §§74-77. 15.Thirdly, the duration of a case management stay and stay under O. 12, r. 8 of RHC is different. A stay pursuant to O. 12, r. 8 of RHC is ordinarily permanent whereas a case management stay is usually temporary. 16.As a result, the legal test and considerations are different. With such obvious difference, it would be disingenuous for LP to say that by paragraph 2 of the Discharge Summons they have complied with the Unless Order. 17.There was plainly a breach of the Unless Order and the effect of the sanction takes effect immediately such that D1,2&5 have been debarred from filing any defence if no relief is granted. 18.O. 2, r. 4 of RHC provides that: “Where a party has failed to comply with a rule or court order, any sanction for failure to comply imposed by the rule or court order has effect unless the party in default applies to the Court for and obtains relief from the sanction within 14 days of the failure.” 19.Undisputedly, the Relief Summons was not taken out within 14 days of the failure to comply with the Unless Order. The court in considering whether to extend time will consider all relevant factors in particular: (1) the length and reason of the delay; (2) the merits of the proposed application for relief from sanction; and (3) the degree of prejudice to the other party. See Cybernetics 1 Ltd v Success Development Information Technology Company Limited & Ors [2025] HKCFI 1349 at §20 per Lok J. 20.For the purposes of considering the merits of the proposed application for relief, O. 2, r. 5 of RHC provides that the court shall consider all the circumstances of the case including the following:
21.I am aware that the above factors are not exhaustive but it is helpful as a checklist of relevant factors. They serve to highlight the grant of relief is discretionary and one must have regard to facts and circumstances of the case in the exercise of discretion bearing in mind the different interest and different factors involved. It is a multi-faceted balancing exercise with no single factor being conclusive. See: The Incorporated Owners of Yue Sun Mansion v Lake Side Elderly Centre Limited (unrep) HCMP 556/2017, 25 October 2017 per Lam VP (as he then was) at §12 and China Medical Technologies, Inc. & Ors v The Bank of East Asia, Limited [2023] HKCFI 2156 per Ng J at §§85-86. 22.Going through the relevant factors:
23.Overall, considering all the circumstances and relevant factors, I would grant extension of time to seek relief and grant the relief from sanction to D1,2&5. There was no doubt substantial delay in seeking relief for which I am not satisfied good reasons were given to explain the delay. However, I have born in mind the merits of the application for relief from sanction, in particular the draconian consequences to D1,2&5 (whose draft DCC is not merely a bare denial and should go to trial) which is a weighty factor, and thus substantial prejudice if an extension of time to apply for relief was not granted. 24.It therefore follows that default judgment cannot be entered against D1,2&5. Re: Discharge Summons 25.The applicable legal principles for the discharge of an ex parte order was comprehensively set out by DHCJ Au-Yeung (as she then was) in Velatel Global Communications Inc & Anor v Chinacomm Limited & Ors (unrep) HCA 1978/2011, 26 October 2012, at §§25-31. I would gratefully adopt the summary of the key points by DHCJ Alexander Stock SC in Platinum Century Limited & Ors v Sunfund Asia Capital Holdings Company Limited & Ors [2022] HKCFI 3334 at §28:
26.The duty of full and frank disclosure extends to matters of law, encompassing significant factual, legal and procedural aspects of the case: see ibid at §29. 27.I would also agree with the following observations of the Deputy Judge ibid at §40:
28.As for whether to exercise the discretion to grant a fresh injunction notwithstanding the ex parte order was obtained in breach of the duty of full and frank disclosure, as set out by the Court of Appeal in Excel Courage Holdings Ltd v Wong Sin Lai [2014] 3 HKLRD 642 at §§56-58, these were summarized ibid at §30:
29.It was submitted by Mr Phang that there were 8 material non-disclosure. In gist, these were the failure to disclose to the Judge that:
30.In Mr Phang’s oral submissions, he accepted that MND1, MND2, MND3 and MND7 relate to the relief for rescission and can be considered together. 31.As I had observed to Mr Phang at the hearing, rescission is only one of the many reliefs claimed by Ps in the draft Writ placed before the Judge. What Ps had to demonstrate to the Judge was a serious issue to be tried or good arguable case on the merits of at least one cause of action which can give rise to monetary relief (for the purposes of seeking a Mareva injunction) and proprietary relief (for the purposes of seeking a proprietary injunction). Even if not each and every relief is sustainable (because say it is plainly unmeritorious or they are alternative remedies for which Ps must elect), that does not mean that there was material non-disclosure or misrepresentation. 32.Besides, in the present case, it is clear from the Skeleton Submissions of Ps placed before the Judge, highlighted in bold in the very first paragraph, Ps claim that there was a fraud and misappropriation of money held on trust. There were various references to “fraud” and “fraudulent scheme” throughout. In particular, under the heading of “good arguable case/serious issue to be tried”, it was stated that Ps primarily assert a proprietary claim against Ds given: (1) the very strong indications that P1 was a victim of a fraudulent scheme and was induced to transfer various sums of money as per D1’s and/or D2’s instructions; (2) the clear admission on the part of D1 during the phone calls of 15 November 2024 and 16 November 2024 (collectively, “the 15 and 16 Nov Calls”) that Ps’ monies were misappropriated for investment in Binance and were defrauded of investment funds; (3) there was also clear evidence of fraudulent conduct by D2; and (4) multiple indicators point to the Ausvic Fund and/or D1’s purported investments of P1’s funds were fraudulent and non-existent (see paragraph 20). The fact that Ds had acted fraudulently and P1 was a victim of investment fraud were relied upon to establish a risk of dissipation and cases involving fraud were cited (see paragraphs 29-30). In the Supplemental Skeleton Submissions, in the very first paragraph, it was stated that the submissions were filed to further assist the Judge on the specific issue of fraud in a situation where there was a purported “investment agreement” under which the funds were transferred and such “investment agreement” contained an arbitration clause. There was also the further citations of two cases at paragraph 4 (巨展皮具香港有限公司 v 上海兄弟海運有限公司 & Anor [2018] HKCFI 53 and Mesirow Financial Administrative Corporation v Best Link Industrial Co., Limited (unrep) HCMP 1846/2015, 25 January 2016) both involving victims of fraud to support the contention that constructive trust directly attaches against Ds insofar as they have been fraudulent receipt of the Sum, rendering proprietary interest in such sums recoverable and traceable in equity and that this was regardless of the purported Subscription Agreement and/or Loan Agreement. 33.Reading the Skeleton Submissions and the Supplemental Skeleton Submissions of Ps placed before the Judge (collectively, “Ps’ Skeletons”) there can be no doubt that Ps’ primary case was based on: (1) fraud for which equity will impose a constructive trust over funds held by fraudulent recipients; and (2) that D1 and D2 misappropriated Ps’ monies in breach of trust. The relief of rescission of the Subscription Agreement was only first mentioned in the Supplemental Skeleton Submissions. Even so, it was made clear that the primary case of Ps was that the “purported agreements” were signed after the transfer of funds and were not genuine (see paragraphs 7.4 and 35 of Skeleton Submissions) and were void ab initio given the fraudulent scheme by Ds to procure funds from P1 (see ibid paragraph 40.2 and paragraph 3.3 of Supplemental Skeleton Submissions). 34.In light of the above, I do not accept, as submitted by Mr Phang, that Ps’ proprietary claims are further to or consequential upon the rescission of the Subscription Agreement. On the authorities submitted to the Judge (巨展皮具香港有限公司and Mesirow Financial Administrative Corporation), and as is well-established, the alleged fraud are independent basis for a proprietary claim to be brought and not consequential for a claim for restitution. Mr Phang relied heavily upon China Cruise Line Ltd v Star Yield Corporation Ltd [2021] HKCFI 2970 for the proposition that upon rescission of a contract induced by fraudulent misrepresentation, the defendant would hold his legal title of the transferred property on resulting trust for the victim of a fraudulent misrepresentation but not before because as explained by Recorder Victor Dawes SC at §38, a contract obtained by a fraudulent misrepresentation is voidable not void. However, that case is clearly distinguishable when in that case the funds were advanced to the defendants pursuant to an agreement. Even in that case, at §38(2), the learned Recorder accepted that there is an exception, “where a contract is not merely induced by fraudulent misrepresentation but is itself the instrument of fraud and no more than a vehicle for obtaining fraud by false pretences”, “akin to theft”, then the contract is not only vitiated but is wholly fictitious and devoid of any legal effect. Whilst he said that the party seeking to rely on this exception faces a very steep hurdle, that is the case at trial where fraud has to be proven to a high standard of proof. However, for the purposes of obtaining a Mareva and proprietary injunction, the standard is merely a good arguable case and a serious issue to be tried respectively. 35.As for MND4 and MND5, which Mr Phang in oral submissions said related to the causes of action based on the tort of deceit and fraudulent misrepresentation, they can also be considered together. Although in the draft Writ and the Affirmation of Li (“Li 1st”) filed in support of the Ex Parte Order, Ps claimed that there were fraudulent misrepresentations and an unlawful means conspiracy by D1 and D2, dishonest assistance by D3-D5 and sought restitution, fraud and misappropriation of trust assets were also relied upon: see sections B3 and C of Li 1st. When the application was made before the Judge, as evident from Ps’ Skeletons, no real reliance was placed on the causes of action based on tort of deceit/fraudulent misrepresentation or unlawful means conspiracy. I do not regard any failure to refer to these causes of action and to conduct a full analysis of the merits of Ps’ claim under those causes of action would amount to material non-disclosure when as mentioned, as clearly indicated, Ps’ primary case was based on fraud and misappropriation of Ps’ monies in breach of trust. 36.As for MND6, Mr Phang submitted that there was material non-disclosure to draw to the Judge’s attention to the admission by D1 during the 15 and 16 Nov Calls was for misappropriation of only US$3M. In the Skeleton Submissions at paragraph 10.2, reference was made to Li 1st, §§51.2-51.3. Whilst no other figure other than $3M were expressly mentioned in those paragraphs, there is at least an arguable case that D1 did admit to using P1’s funds for a purpose other than for investment in the Ausvic Fund. Even if there was no express reference to $9M, there can be no complaint that there was material non-disclosure of that matter when the relevant conversation relied upon was set out in the body of Li 1st, §§51.2 -51.3, which one can have expected the Judge to have read and formed his own views. Mr Wong also confirmed that in fact at the hearing, the Judge was taken to the actual transcripts of the telephone conversation in the exhibits of Li 1st. Having taken the Judge to the transcripts, there can be no complaint that the Judge’s attention was not drawn to what was admitted or not admitted by D1 when he had those transcripts to read for himself. 37.In any event, in Li 1st at §52, it was stated that the above recordings constituted clear and unequivocal evidence that the funds or at least part thereof were not invested in Ausvic Fund and that P1 had been defrauded of his investment funds. The Judge must have read at least the body of Li 1st and would not have been misled or not have known what Ps’ case was. 38.Lastly, in respect of MND8, it was submitted that there was a failure to disclose that there was no reasonable evidence that D3 to D5 still retained or held Ps’ funds for the purposes of seeking a proprietary injunction. However, in the Skeleton Submissions at §13.4, the Judge was informed of the principle that to justify the grant of a proprietary injunction, the plaintiff should ordinarily adduce some reasonable evidence of the existence of the specific asset or its traceable proceeds and the same is being held by or under the control of the defendant but if it has been dissipated and can no longer be traced a proprietary injunction cannot ordinarily be granted which was taken from Americhip Inc v Zhu Hongling & Ors [2021] HKCFI 2073 which at §5 had referred to Zhang Yan & Ors v ASA Bullion Limited [2019] HKCFI 179. Furthermore, in Li 1st at §64.10, the Judge was informed that it may be that Ps’ investment funds have all been dissipated already, and Ps had stated that “in order to justify the grant of a proprietary injunction, the plaintiff should ordinarily adduce some reasonable evidence of the existence of the specific assets… being held by or under the control of the defendant.” 39.In all, I do not find any material non-disclosure and would not discharge the Varied Injunction Order. That said, given the admission in SOC that the balance of the accounts of D3-D5 are zero, which was known following the disclosure made pursuant to the Varied Injunction Order, the proprietary injunction against D3-D5 should now be discharged. 40.For completeness, I should say that even if I was wrong and there was material non-disclosure, I would have re-granted the Mareva injunction. I cannot see how any of the alleged non-disclosure were material and even if they were, they were not serious, significant and could not have been deliberate. Given that there has been an admission of the misappropriation of at least some of Ps’ funds by D1 coupled with the delays to account for Ps’ funds and to file a defence despite court orders which demonstrates a serious risk of dissipation, to not re-grant the Mareva injunction would be a disproportionate penalty to any non-disclosure by Ps. I have not overlooked the alleged breach of the undertaking to serve on Ds the affidavits and exhibits and skeleton submissions but Ps explained that they were left at the reception due to the inability to physically fit them into the letter boxes of D1 and D2. Besides, when Ds chose not to attend the inter-parte hearing, there can be no prejudice to them and these documents have now been served on them. Disposition 41.Accordingly, I would allow the Relief Summons but dismiss the Default Judgment Summons and Discharge Summons (save as mentioned in paragraph 39 above). 42.I make a costs order nisi that D1,2&5 should pay to Ps the costs of the Relief Summons, Default Judgment Summons and Discharge Summons to be taxed if not agreed. Any application to vary the costs order nisi should be made within 14 days from the handing down of this Decision failing which it shall become absolute.
Mr Adrian CK Wong, instructed by Messrs. Arthur Hong LLP., for the 1st and 2nd Plaintiffs Mr Roger Phang and Mr Kelvin Tse, instructed by Messrs. Li & Partners, for the 1st, 2nd and 5th Defendants [1] By paragraph 2 of the Discharge Summons, D1,2&5 also sought a case management stay in respect of Ps’ claims against D1,2&5 pending the determination of arbitration proceedings between P1 and Ausvic Capital GP I Limited (“Ausvic GP”). However, as stated in a letter from D1,2&5’s solicitors (“LP”) to Ps’ solicitors (“AH”) dated 16 October 2025 and as confirmed in a joint letter to this Court dated 23 October 2025, this is no longer pursued by D1,2&5. |
Cases cited in this judgment